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Thursday, January 3, 2013

Why Investors should not Ignore Carl Icahn

Carl Icahn is a billionaire investor who invests in companies and
sometimes also manages them. Yet most of his companies - or rather companies in
which he has invested - trade at discounts to their book values and despite his
wealth and ability to gobble up companies Icahn does not command the respect
that another well-known investors does - Warren Buffet.

Kiplinger has an interesting piece on this phenomenon written by
Andrew Feinberg, who runs a hedge fund.

Buffet's stock picks trade at premium partly due to the reputation
of the man himself. Investors feel that if Buffet has the stock, it must be
worthwhile to possess it.

According to Feinberg, investors should see the discount at which
Icahn's stocks are trading as a good investment opportunity.

Feinberg says, "Icahn, 76, is arguably one of the
great value investors of all time, and by one key measure may be an even better
investor than Buffett. From 1968 through 2011, Icahn compounded the initial
$100,000 he invested in his Wall Street firm at a 31% annual rate. Over the
same period, the book value of Buffett's Berkshire Hathaway grew 20 percent
annualized."

Icahn' returns from his investments have also been extraordinary,
Feinberg's research showed. "An annualized 26.1 percent through June 30,
compared with 7.3 percent for Standard & Poor's 500-stock index, according
to the 13D Monitor, a research service. This is a crucial number for investors
because it means they can successfully piggyback on Icahn's investments. For
example, on January 13, 2012, Icahn filed a 13D on CVR Energy, with the stock
at $23. On November 30, 2012, it closed at $46.

Warren Buffet is, of course, a household name and known even to
individual investors and non-investors. However Icahn can lay equal claim to
fame and it would be worthwhile for investors to monitor his stocks in the New
Year.